EXHIBIT 99.14
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
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MAX GRILL, :
: Civil Action No.
Plaintiff, : 17396NC
:
-against- :
:
JOHN HOYT STOOKEY, THEODORE M. :
SOLSO, ANN MAYNARD GRAY, :
ROCKWELL A. SCHNABEL, BILLIE B. :
TURNER, MILTON H. WARD, WILLIAM C. :
BOUSQUETTE, LINDA G. ALVARDO, :
THOMAS V. FALKIE, GEORGE S. ANSELL :
and CYPRUS AMAX MINERALS COMPANY, :
:
Defendants. :
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CLASS ACTION COMPLAINT
----------------------
Plaintiff, by his attorneys, alleges upon information and belief,
except as to paragraph 1 which plaintiff alleges upon knowledge, as follows:
1. Plaintiff Max Grill is a stockholder of defendant Cyprus Amax
Minerals Company ("Cyprus Amax" or the "Company"), and has been a Cyprus Amax
shareholder at all times relevant hereto.
2. Defendant Cyprus Amax is a Delaware corporation with its
principal executive offices located at 9100 East Mineral Circle, Englewood,
Colorado 80112. Cyprus
Amax produces copper, coal, and molybdenum, and explores
for minerals worldwide. As of August 3, 1999, there were over 90 million shares
of Cyprus Amax common stock outstanding.
3. The individual defendants have constituted the Board of Directors
of Cyprus Amax at all times relevant hereto.
4. In addition to serving as a Cyprus Amax director, individual
defendant Milton H. Ward ("Ward") has been Chairman of the Board, President and
Chief Executive Officer of Cyprus Amax since 1992. Those positions constitute
his principal occupation. In calendar 1998, Ward received a salary of
$1,133,524, a bonus of $975,000 and long-term compensation awards valued in
excess of $1.5 million.
5. The Individual Defendants, as officers and/or directors of Cyprus
Amax, have a fiduciary relationship and responsibility to plaintiff and the
other common public stockholders of Cyprus Amax, and owe to plaintiff and the
other Cyprus Amax stockholders the highest obligations of good faith, loyalty,
fair dealing, due care and candor.
CLASS ACTION ALLEGATIONS
------------------------
6. Plaintiff brings this action on his own behalf and as a class
action, pursuant to Rule 23 of the Rules of the Court of Chancery, on behalf of
all common stockholders of Cyprus Amax or their successors in interest, who are
being and will be harmed by defendants' actions described below (the "Class").
Excluded from the Class are defendants herein and any person, firm, trust,
corporation, or other entity related to or affiliated with any of defendants.
7. This action is properly maintainable as a class action because:
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a. The Class is so numerous that joinder of all members is
impractica ble. As of August 3, 1999, there were more than 90 million Cyprus
Amax shares outstanding, held by hundreds, if not thousands, of stockholders
located throughout the United States.
b. There are questions of law and fact which are common to the
Class including: whether the Individual Defendants have breached fiduciary
duties to Cyprus Amax's public stockholders and whether plaintiff and the other
Class members would be irreparably damaged if the defendants are not enjoined
in the manner described below.
c. Plaintiff is committed to prosecuting this action and has
retained competent counsel experienced in litigation of this nature. The claims
of plaintiff are typical of the claims of the other members of the Class and
plaintiff has the same interests as the other members of the Class.
Accordingly, plaintiff is an adequate representative of the Class and will
fairly and adequately protect the interests of the Class.
d. The prosecution of separate actions by individual members of
the Class would create the risk of inconsistent or varying adjudications with
respect to individual members of the Class which would establish incompatible
standards of conduct for defendants, or adjudications with respect to
individual members of the Class which would as a practical matter be dispositive
of the interests of the other members not parties to the adjudications or
substantially impair or impede their ability to protect their interests.
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e. The defendants have acted, or refused to act, on grounds
generally applicable to, and causing injury to the Class and, therefore,
preliminary and final injunctive relief on behalf of the Class as a whole is
appropriate.
CLAIM FOR RELIEF
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8. On July 15, 1999, Cyprus Amax and ASARCO Incorporated ("Asarco")
announced an agreement for the combination of the two companies in a merger-of-
equals transaction (the "Merger"). The new company, to be named Asarco Cyprus
Incorporated, would be the largest publicly traded copper company in the world.
Under the terms of the transaction, Cyprus Amax common shareholders would
receive 0.765 shares of Asarco Cyprus common stock for each share of Cyprus Amax
common stock they own and ASARCO shareholders would receive one share of Asarco
Cyprus common stock for each share of ASARCO common stock they own. It was
anticipated that approximately 109 million shares of Asarco Cyprus common stock
will be issued, of which Cyprus Amax shareholders will own 69.2 million shares
or 63.5 percent following the Merger.
9. The Merger agreement provides that Asarco Cyprus would have a 16-
person board with eight members nominated by Cyprus Amax and eight by ASARCO.
Ward would be the co-Chief Executive Officer and Chairman of the combined
entity.
10. The foregoing exchange ratio offers no premium to the pre-
existing market value of the Cyprus Amax stock. Although the Merger agreement
permits the Cyprus Amax Board to terminate the Merger if in the exercise of
their fiduciary duties they determined that
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another proposal offered a superior transaction, the Merger agreement expressly
precludes both ASARCO and Cyprus Amax from entering into discussions with any
third party (the "No-Talk Provision").
11. Some time between July 15, 1999 and August 19, 1999, Phelps Dodge
Corporation ("Phelps Dodge") made an unsolicited proposal to acquire both Cyprus
Amax and ASARCO. Phelps Dodge offered .2874 Phelps Dodge share for each Cyprus
Amax share, and .3756 Phelps Dodge share for each ASARCO share.
12. The exchange ratios contemplated by Phelps Dodge's initial offer
represented a premium to the trading price of Cyprus Amax common stock. Based
on Phelps Dodge's closing price of $58-9/16 on August 19, 1999, its bid valued
Cyprus Amax at $16.83 a share -- over $2 per share or approximately 16% more
than the $14.50 closing price of Cyprus Amax common stock on August 19, 1999.
In addition, the proposal would result in a dividend increase for Cyprus Amax
shareholders to 4.1 times the dividend contemplated to be paid by Asarco Cyprus.
Moreover, over the past ten years, Phelps Dodge's total return has been 161% as
compared to negative 26% for Cyprus Amax and negative 20% for ASARCO. A
combination of the three companies would create a larger, more efficient,
financially stronger company with a stronger balance sheet and enhanced earnings
and cash flow.
13. Notwithstanding that the Phelps Dodges offer represented a far
better value for Cyprus Amax shareholders, the Individual Defendants spurned at
least three efforts by Phelps Dodge to discuss its offer and on August 19, 1999
voted to reject the the Phelps Dodge
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offer. Citing the No-Talk Provision, they refused to discuss the offer with
Phelps Dodge. Both the ASARCO and Cyprus Amax Boards reaffirmed their
determination to proceed with the Merger.
14. Phelps Dodge is known in the copper industry as an aggressive
cost cutter willing to terminate personnel in order to enhance revenues.
Accordingly, Ward's job could be in jeopardy if Phelps Dodge were to acquire
Cyprus Amax. Moreover, Phelps Dodge would have no motivation to maintain the
Board structure contemplated by the Merger agreement.
15. ASARCO and Cyprus Amax did not publicly disclose the Phelps Dodge
offer or the text of the Merger agreement until August 20, 1999. On that date,
Cyprus Amax and ASARCO also disclose that the record date for shareholders to
vote at the September 30 shareholders' meeting to consider the Merger would be
Wednesday, August 25, 1999. Cyprus Amax had apparently sought and obtained a
waiver of the New York Stock Exchange minimum requirement for the time between
the announcement that a record date has been set and the record date itself.
Since it takes three days to clear transactions and only shareholders who own
shares on the record date can vote at a meeting, this late announcement of the
record date limits informed market trading and the ability of shareholders who
prefer the Phelps Dodge offer to purchase additional shares to vote against the
Merger.
16. On August 20, 1999, Phelps Dodge improved its offer to 0.4098
Phelps Dodge share for each ASARCO share and 0.3135 Phelps Dodge share for each
Cyprus Amax
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share, valuing Cyprus Amax at $1.68 billion or $18.54 per share, a premium of
approximately 29% to the pre-existing market price.
17. Phelps Dodge also indicated that it would be willing to improve
upon its offer for Cyprus Amax dependent on discussions with the Company.
18. Phelps Dodge also announced that it is willing to acquire either
Cyprus Amax or ASARCO individually.
19. On August 22, 1999, Phelps Dodge announced its intention to
pursue a proxy contest against the Merger.
20. In light of the foregoing, the Individual Defendants fiduciary
obligations require them to:
a. undertake an appropriate evaluation of Cyprus Amax's worth
as a merger/acquisition candidate;
b. take all appropriate steps to enhance Cyprus Amax's value
and attractiveness as a merger/acquisition candidate;
c. take all appropriate steps to obtain the best available
transaction for Cyprus Amax, including but not limited to, engaging in serious
negotiations with Phelps Dodge or its representatives;
d. act independently so that the interests of Cyprus Amax's
public stockholders will be protected;
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e. adequately ensure that no conflicts of interest exist
between defendants, own interests and their fiduciary obligation to maximize
stockholder value or, if such conflicts exist, to ensure that all conflicts be
resolved in the best interests of Cyprus Amax's public stockholders; and
f. insure that they and Cyprus Amax's shareholders have
available all information material to decisions on a major corporate
transaction, including the highest consideration each potential acquiror is
prepared to offer and the terms and conditions of each offeror's proposal.
21. By agreeing to the No-Talk Provision, the Individual Defendants
breached their fiduciary duties. They contracted away their ability to inform
themselves adequately to make judgments in the best interests of all Cyprus Amax
shareholders, and to obtain information to convey to Cyprus Amax shareholders to
enable them to exercise an informed franchise on the Merger.
22. The Individual Defendants have also manipulated the setting of a
record date for the shareholders' meeting on the Merger in order to improve the
prospects for share holder approval of the Merger.
23. As a result of defendants' breaches of fiduciary duties,
plaintiff and the other members of the Class have been and will be damaged in
that they will not be able to exercise fully informed voting judgment on the
Merger and will be prevented from obtaining the best available transaction.
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24. Unless enjoined by this Court, defendants will continue to breach
their fiduciary duties owed to plaintiff and the other members of the Class, all
to the irreparable harm to the Class.
25. Plaintiff and the other members of the Class have no adequate
remedy at law.
WHEREFORE, plaintiff prays for judgment and relief as follows:
A. Ordering that this action may be maintained as a class action and
certify ing plaintiff as Class representatives;
B. Declaring that defendants breached their fiduciary and other
duties to plaintiff and the other members of the Class;
C. Entering an order or orders requiring defendants to take the
steps set forth hereinabove and declaring the No-Talk Provision void and non-
enforceable;
D. Awarding compensatory damages against defendants individually and
severally in an amount to be determined;
E. Awarding plaintiff the costs and disbursements of this action,
including fees and experts' fees; and
F. Granting such other and further relief as the Court may deem just
and proper.
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ROSENTHAL, MONHAIT, GROSS &
GODDESS, P.A.
By:_____________________________________________
Suite 1401, Mellon Bank Center
919 North Market Street
P.O. Box 1070
Wilmington, Delaware 19899
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
STULL STULL & BRODY
6 East 45th Street
New York, NY 10017
(212) 687-7230
Dated: August 26, 1999
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